Question

From the view point of the company mention two disadvantages of raising money by the issue of shares.

Answer 1

1. Dilution of Control: Issuing new shares reduces the control of existing owners, as shareholders get voting rights and influence in the company’s decisions.
2. Dividends Are Not Tax-Deductible: Unlike interest on loans, dividends paid to shareholders are not tax-deductible, which can increase the company’s tax burden.